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UK wind power is becoming increasingly central to the Government’s energy strategy, with the country’s ambitious target to provide 15 per cent of total power consumption from renewable sources by 2020 stimulating the market for onshore projects.
Scotland, with its strong supply of raw energy, is a hub for UK wind farm development and aims to produce 80 per cent of electricity from renewable sources by 2050.
Community Windpower is an operator that plans to make a significant contribution to these targets in the coming years, whilst providing economic, environmental and educational benefits to the local communities to which it supplies electricity.
As part of its ongoing development strategy, the organisation aims to develop a portfolio of more than 200 megawatt (MW) of wind farm projects in the UK over the next three years. The first, Millour Hill, is a landmark development that will see the first use of Siemens’ Direct Drive turbine technology in the UK. The project requires a £21.6 million debt package to fund its construction and operation.
To finance the Millour Hill facility, Community Windpower secured an agreement with Lloyds Bank Commercial Banking (“Lloyds Bank”), drawing on the European Investment Bank’s Intermediated Lending Scheme for Onshore Wind Projects.
In April 2011, Millour Hill, an 18MW wind farm in North Ayrshire, reached financial close. Sponsored by Community Windpower, an independent wind farm operator, the Millour Hill project will contribute to Scotland’s renewable energy targets and provide the communities of Dalry, Kilbirnie and Beith with reliable, green electricity.
The Millour Hill project will consist of six turbines with a maximum tip height of 125 metres, generating up to 18MW of clean electricity. It will displace approximately 20,300 tonnes of carbon dioxide per annum, 470 tonnes of nitrous oxide and 140 tonnes of sulphur dioxide. Millour Hill is expected to be operational in early 2012 and will supply power to approximately 14,000 homes in the local area.
The wind farm will also be the first in the UK to utilise Siemens’ direct drive turbines, which require half the component parts required for conventional geared wind turbines, allowing for increased output and ease of maintenance. The project will also be supported by a 15 year service agreement from Siemens – representing a significant commitment from one of Europe’s leading turbine providers – while electricity generated will be sold via a long-term PPA to multinational energy company, GDF Suez.
Millour Hill will supplement the existing six turbine, 18MW Dalry Community wind farm, a Community Windpower project which became operational in 2006.
Lloyds Bank acted as sole mandated lead arranger on a £21.6 million debt package to fund the construction and long-term operation of Millour Hill, as well as further future Community Windpower projects.
It is the fourth transaction Lloyds Bank has supported under the UK onshore wind European Investment Bank (EIB) Intermediated loan facility, which provides a financing benefit in relation to 50 per cent of the total investment cost.
Community Windpower selected Lloyds Bank based on its Renewable Energy team’s proven expertise in backing onshore wind farm projects, having jointly funded RES’ 48MW Hill of Towie and 28MW Kelburn windfarms, and Infinis Group’s 22MW Glenkerie project in 2010.
The wind farm developer also recognised Lloyds Bank’s as one of the market leaders in the wider renewable energy sector. To date, Lloyds Banking Group has arranged or underwritten approximately £2.4 billion for over 45 projects worldwide.
As well as financing Millour Hill, the new long-term portfolio facility will see Community Windpower grow its onshore wind assets to in excess of 200MW capacity over the next three years. The package will also enable the company to reduce costs through the standardisation of financing terms and documentation over the period of the facility, and protect cash flows by cross-collateralising projects as necessary.
As a result of the strong relationship Lloyds Bank has developed with Community Windpower, it has been mandated to finance the operator’s next asset.
Ed Wilson, Head of Renewables at Lloyds Bank Commercial Banking Project Finance, said: “Community Windpower is a highly progressive and ambitious organisation whose community-focused, consultative approach delivers local energy supplies with economic, environmental and educational benefits.
“Whilst contributing to Scottish and UK renewable energy goals, and benefiting the local community it will power, Millour Hill is made even more significant by Community Windpower’s newly formed partnership with Siemens. The project will be one of the UK’s most efficient wind farms thanks to the turbine manufacturer’s Direct Drive technology and, as such, will set the benchmark for similar small and medium-sized facilities.
“The funding structure in place illustrates our long term support for Community Windpower and its intention to significantly grow its portfolio, and will allow the organisation to reduce professional adviser costs over the 15 year period of the facility.”
Rod Wood, Managing Director at Community Windpower, commented: “Millour Hill is the latest in a series of planned wind farm projects that will provide notable environmental and social advantages to local communities, whilst continuing to clean the UK’s energy output.
“Lloyds Bank was the natural choice to finance the facility from a very early stage, taking into account its excellent record in supporting onshore wind farms and wider renewable energy projects.
“Through the lender’s trusted advice, sector expertise, complex structuring skills and subsequent long-term commitment, we have secured a debt package that not only positions us to construct and operate Millour Hill, but also to grow our assets over the next three years.”
Head of Renewable Energy, Project Finance
Lloyds Bank Commercial Banking
Telephone: 020 7158 8332